Chennai may become India's Detroit soon

Chennai may become India's Detroit soon

With investments of $3 billion and a new national testing-R&D facility, the city is putting India on the global auto map.

Chennai is emerging as the country's largest automotive and auto components manufacturing hub in terms of investment.

According to a state government official, over $3 billion (around Rs 13,800 crore) will be invested in Chennai by global car manufacturers by end of 2010-11. The proposed investment is significantly higher than other auto hubs like Gurgaon in Haryana.

Chennai may become India's Detroit soon

Tamil Nadu Industry Secretary Rajeev Ranjan said the total installed capacity in and around Chennai would be 1.28 million cars a year by the end of the financial year. But, that figure is expected to go up significantly thanks to projects by Ford, Hyundai, BMW, Renault- Nissan and Mitsubishi-HM coming up in the area.

"Every third car produced in India is from in and around Chennai," says Ranjan. Similarly, the region will see the manufacture of around 350,000 commercial vehicles a year by the end of 2010-11. In 2008-09, 560,000 passenger cars were manufactured, accounting for 30.6 per cent of India's total production.

Chennai may become India's Detroit soon

Haryana has an installed capacity of around 4.8 million vehicles (1.2 million for Maruti and 3.6 million for Hero Honda).

Harley Davidson is also setting up an assembly unit at Bawal in Haryana, which will become operational by the first half of 2011. However, the company has not yet furnished details on its investment or production plans.

Chennai may become India's Detroit soon

The automotive industry occupies an important place in the industrial map of Tamil Nadu. The state's innovative policy for the sector offers an attractive package of support to projects investing more than Rs 4,000 crore (Rs 40 billion).

As a result, since May 2006, investments attracted by Tamil Nadu in automotive and auto components manufacturing is around Rs 21,900 crore (Rs 219 billion).

That's almost five times the investments attracted during previous 15 years. The employment potential, both direct and indirect, in these new projects is roughly 120,000.

Chennai may become India's Detroit soon

V Sumantran, executive vice-chairman, Hinduja Automotive, and chairman, Defiance Technologies, says India will produce around 2 million passenger car units in 2010. In a couple of years, annual production is expected to increase to around 10 million units a year.

"Though the role of the ecosystem in Chennai cannot be underestimated, many measures on integration within the IT sector will be required to turn Chennai into the Detroit of the future," he says.

Chennai may become India's Detroit soon

Kiminobu Tokuyama, managing director and CEO, Nissan Motor India, which has set up a Rs 4,500-crore (Rs 45 billion) manufacturing unit at Oragadam, near Chennai, along with French partner Renault, said the proactive industrial policies of the Tamil Nadu government helps expansion and setting up of technology centres in Chennai.

"Nissan is bullish about India's small-car segment - it is in the process of introducing new small-car models in the years to come," he adds.

Chennai may become India's Detroit soon

The most critical intervention of the central government thus far in the automotive sector has come in the form of an ambitious project to set up world-class automotive testing and R&D infrastructure.

This will deepen manufacturing, encourage localised R&D, boost exports and converge India's strengths in IT and electronics with automotive engineering to help the country garner a larger share of the $6-trillion global automotive business.

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Image: Robots work at the Ford plant in Chennai.Photographs: Sreeram Selvaraj.

Chennai may become India's Detroit soon

The Centre is currently implementing National Automotive Testing and R&D Infrastructure Project in Oragdam, Chennai, at a cost of around Rs 450 crore (Rs 4.5 billion).

This project aims to facilitate the introduction of world-class automotive safety, emission and performance standards in the country and ensure seamless integration of our automotive industry with the global industry.

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Image: Engine being fitted to a car at the Ford plant in Chennai.Photographs: Sreeram Selvaraj.

Chennai may become India's Detroit soon

The country's second-largest car manufacturer, Hyundai Motor India Ltd (HMIL), for instance, is looking to expand capacity to 660,000-670,000 units a year at its facility in Chennai next financial year.

Chennai may become India's Detroit soon

With the growth momentum expected to be sustained, the company is preparing to roll out another 60,000-70,000 vehicles from the plant at Chennai, which has an installed capacity of 600,000 units a year.

Arvind Saxena, director and board member (marketing & sales), HMIL, says, "We will initiate de-bottlenecking processes to make available capacity at the premises. With the measures in place, our capacity is set to go up by another 10 per cent."

Chennai may become India's Detroit soon

HMIL, however, does not have plans to establish a new plant at present.

"We export cars to over 110 countries. However, with international markets still recovering from the slowdown, the surplus can be diverted to meet demand in the domestic market. Increased capacity should be sufficient to meet demand in the next financial year," adds Saxena.

Chennai may become India's Detroit soon

HMIL had announced its intention to set up a diesel engine plant in the country and feasibility studies are on for the project. A decision is likely to be taken early next year.

The company, which currently has seven product offerings spanning the compact car, mid-size sedan, sports utility vehicle and premium segments, is working on bringing a full line-up to India over the next three years.

Chennai may become India's Detroit soon

HMIL recorded sales of 52,225 units in October this year, up 0.9 per cent over 51,735 units in October last year.

While domestic sales grew a robust 22.7 per cent, exports remained in the red by over 25 per cent to 17,500 units last month. The company registers nearly 90 per cent of its sales from the compact car segment.